Zone 1 Regional and Accounting Office Audit Report 2006010
12 Pages
English

Zone 1 Regional and Accounting Office Audit Report 2006010

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TABLE OF CONTENTSINTRODUCTION 1SCOPE 1EXECUTIVE SUMMARY 1ZONE OFFICE RESPONSE 2FINDINGS AND RECOMMENDATIONSCash ReceiptsMail Opening 2Improper Separation of Duties 2-3CIMS/ASSIST SECURITYBack-up Tapes 3Security Officers Log Reports(VB9-173), (VB9-163) and (LR-853) 3-4LASR Security Agreements 4-5Cash DisbursementsSignature Card at the Bank 5Documentation for Payments 5-6General LedgerOutstanding Checks 6Bank Reconciliation not Prepared Timely 6Modified Accrual Basis Balance SheetAccounts Receivable Due from State 7Safe and Controlled DocumentsControlled Document Log 7Physical Inventory of Controlled Documents 8Procurement CardReconciliation of the Transaction Detail Report 8-9Payroll and TimekeepingIndependent File for the Certified HR-332A Report 9Time Released Prior to Certification t 9-10Reconciliation of HR-332A to the Turnaround HR-332A 102INTRODUCTIONThe Office of Internal Audit performed an audit of Zone 1 office including theRegional Accounting Unit DHS for the period October 1, 2004 through October 28,2005. The objectives of our audit were to determine if internal controls in place at theRegional Accounting Unit provide reasonable assurance that departmental assets aresafeguarded, transactions are properly recorded on a timely basis, and policies andprocedures of the Department of Human Services (DHS) are being followed. The Zone1 office had 17 full time equated ...

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INTRODUCTION
SCOPE
EXECUTIVE SUMMARY
ZONE OFFICE RESPONSE
TABLE OF CONTENTS
FINDINGS AND RECOMMENDATIONS
Cash Receipts Mail Opening
Improper Separation of Duties
CIMS/ASSIST SECURITY Backup Tapes
Security Officers Log Reports(VB9173), (VB9163) and (LR853)
LASR Security Agreements
Cash Disbursements Signature Card at the Bank
Documentation for Payments
General Ledger
Outstanding Checks
Bank Reconciliation not Prepared Timely
Modified Accrual Basis Balance Sheet
Accounts Receivable Due from State
Safe and Controlled Documents
Controlled Document Log
Physical Inventory of Controlled Documents
Procurement Card Reconciliation of the Transaction Detail Report
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Payroll and Timekeeping Independent File for the Certified HR332A Report
Time Released Prior to Certification
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Reconciliation of HR332A to the Turnaround HR332A
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INTRODUCTION
The Office of Internal Audit performed an audit of Zone 1 office including the
Regional Accounting Unit DHS for the period October 1, 2004 through October 28,
2005. The objectives of our audit were to determine if internal controls in place at the
Regional Accounting Unit provide reasonable assurance that departmental assets are
safeguarded, transactions are properly recorded on a timely basis, and policies and
procedures of the Department of Human Services (DHS) are being followed. The Zone
1 office had 17 full time equated positions (FTE's), including 4 that were assigned to
the Regional Accounting unit at the time of our review.
SCOPE
Our audit was performed in accordance with Standards for the Professional Practice of
Internal Auditing issued by the Institute of Internal Auditors. We obtained descriptions
of significant systems operating at the Zone 1 office and Regional Accounting Unit and
evaluated controls in each system. We tested the systems for compliance, where
feasible. We included the following systems:
Cash Receipts
Safe and Controlled Documents
CIMS/ASSIST/LASR
General Ledger
EXECUTIVE SUMMARY
Cash Disbursements
Procurement Cards
Payroll and Timekeeping
Modified Accrual Basis Balance Sheet
Based on our audit, we conclude that the Zone 1 office and Regional Accounting Unit
internal controls need improvement in order to provide management with reasonable
assurance that assets are safeguarded and transactions are executed in accordance with
management’s authorization. We found several instances of noncompliance with DHS
policies and procedures and weaknesses in internal controls, which are detailed below.
ZONE OFFICE RESPONSE
The management of the Zone 1 Office has reviewed all findings and recommendations
included in this report. They indicated in an email dated December 1, 2005 that they
are in general agreement with the report and have implemented corrective action for all
items.
FINDINGS AND RECOMMENDATIONS
Cash Receipts
Mail Opening
1.
The Zone 1 Office had one employee pick the mail up from the mail box in an
open container. Accounting Manual Item 431 states that two people should pick
up the mail unless it is transported in a locked bag. Having two employees pick up
the mail helps to ensure that all items received are recorded.
WE RECOMMEND that the Zone 1 Office have two people pick the mail up from
the mail box.
Note: Corrective action taken while the auditor was on site.
Improper Separation of Duties
2.
The Zone 1 Office did not properly separate the mail opening duties from the fiscal
duties. The same employees who opened the accounting unit’s mail also
performed the cash receipts and disbursements functions. For internal control
purposes the duties of mail opening and fiscal duties should be separated to ensure
that all items received are appropriately processed.
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WE RECOMMEND that the Zone 1 Office separate the mail opening duties from
the fiscal duties.
Note: Corrective Action was taken while the auditors were on site. The Zone 1
administrative support staff now open the mail, and forward the negotiables to the
fiscal unit.
CIMS/ASSIST/LASR Security
Back up Tapes
3.
The Zone 1 Office did not retain back up tapes for its Novell server in a secure
location or off site. The back up tapes were stored in a lateral file in the zone
office. According to the Primary Internal Control Criteria for Local/District Office
Operations the back up tapes are to be kept on site in a fire proof safe, and a copy
also retained off site. Maintaining back up tapes in secure and off site locations
helps to ensure that records could be recreated, if necessary.
WE RECOMMEND that the Zone 1 office store its backup tapes in a secure
location and store a copy in an offsite location.
Security Officers Log Report (VB9173), (VB9163), and (LR853)
4.
The Zone 1 Office did not properly reconcile the ASSIST and LASR Security
Officer’s Log Reports. Delta County DHS maintained and performed the security
function for the Zone 1 Office for CIMS and ASSIST. The Regional Accounting
Unit maintained the LASR agreements. The security coordinator at Delta County
DHS was receiving the ASSIST Security Officer’s Log Report (VB9173), and
then forwarding it to the Security Officer. In addition, the Security Coordinator
was receiving the Violation Report (VB163), and not forwarding it to the Security
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Officer. Also, the Security Officer was not reconciling the reports to the updated
Security Agreements/Enrollment Profiles, but was reconciling them to a log
maintained by the Security Coordinator, which was not kept up to date. The
Primary Internal Control Criteria for DHS Local/District Offices recommends that
the Security Officer receive these reports directly for reconciliation purposes.
In addition, the Zone 1 Office did not have a LASR Security Officer. Therefore,
no one reconciled the Security Officer’s Log Report (LR853) to the Local
Accounting System Replacement (LASR) Access Security Request (DHS84).
The Primary Internal Control Criteria for Local/District Office Operations
recommends that an independent person reconcile these reports to ensure that all
changes made are accurate and approved by supervision.
WE RECOMMEND that the Zone 1 Office appoint a LASR Security Officer and
ensure that the ASSIST and LASR security reports are appropriately distributed
and reconciled.
Note: Corrective action taken while the auditor was on site. The fiscal supervisor
prepared a revised DHS84 to include security officer duties.
LASR Security Agreements
5.
Regional Accounting did not have accurate, up to date Security Agreements on file
for all employees listed on the User Responsibility Listing (LR890). Each local
office in the zone had one or more employees with LASR access who were
included on the Regional Accounting LR890. Regional Accounting did not have
Security Agreements (DHS84) on file for these employees. In addition, most of
these employees had access to transactions not necessary to perform their job
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function. Most did not need access beyond Inquiry. Also, two employees in the
Regional Accounting Unit had Security Officer status in LASR. Both of these
employees also had access that allowed them to input transactions in LASR.
WE RECOMMEND that Regional Accounting obtain accurate, uptodate Security
Agreements for all employees included on their User Responsibility Listing and
delete transactions for employees who have access not needed or inappropriate for
their positions.
Cash Disbursements
Signature Card at the Bank
6.
The Regional Accounting Unit did not ha ve the current Zone Manager’s name on
the signature card on file at the bank as authorized to sign checks. For internal
control purposes the authorized check signer should have a current signature card
on file at the bank.
WE RECOMMEND that the Regional Accounting Unit remove the previous
director’s name and prepare a new signature card with the zone1 manager’s name
as the authorized check signer.
Note: Corrective action taken while the auditor was on site.
Documentation for Payments
7.
The Regional Accounting Unit processed approximately 8,300 payments during
the period of our review. They did not have all required payment documentation
attached to the check copy for 10 of the 57 transactions we reviewed. We noted
that 5 payments were made from a fax copy, one had no invoice attached, two
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documents were not stamped “PAID,” and one document did not show the amount
needed to stop a foreclosure. In addition, one check was issued to a relative
instead of a provider, and the invoice for one of the items included in that payment
did not have a business name printed on the invoice. The invoice was a blank
invoice form that could be purchased by anyone in an office supply store. The
Accounting Manual Items related to each payment type indicate the necessary
documentation required to support a payment.
WE RECOMMEND that the Regional Accounting Unit ensure that appropriate
original supporting documentation is attached to all check copies to support
payments made.
General Ledger
Outstanding Checks
8.
The Regional Accounting Unit had 10 checks on the outstanding checklist that
were over six months old. Accounting Manual Item 405 states that checks over 6
months old are to be voided and the bank balance adjusted.
WE RECOMMEND that Regional Accounting Unit void stale dated checks and
adjust the bank balance according to the accounting manual
Note: Corrective action taken while the auditor was on site.
Bank Reconciliation not Prepared Timely
9.
The Regional Accounting Unit did not perform the Bank Reconciliation timely.
The Bank Reconciliation was last prepared for the month of June 2005.
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Accounting Manual Item 405 states that the bank account must be reconciled
monthly by the end of the month following the statement month.
WE RECOMMEND that Regional Accounting Unit reconcile the bank account in
accordance with the Accounting Manual.
Note: Corrective action taken while the auditors were on site.
Modified Accrual Basis Balance Sheet
Accounts Receivable Due from State
10. The Regional Accounting Unit did not reconcile the Accounts Receivable Due
from State Accounts (078) listed on the Balance Sheet for the Guardianship (20)
and the State Administrative (036). Accounting Manual Item 4023 requires a
monthly reconciliation of accounts receivable due from State to be performed by
comparing the General Ledger balance for each 078 account to the total of the
documents in the respective Outstanding Accounts Receivable file. Reconciling
the Due from State account to the detail ensures that the account balances are
correct and all transactions are accounted for.
WE RECOMMEND that the Regional Accounting Unit reconcile the 020 and 036
account detail to the general ledger as required by the Accounting Manual.
Safe and Controlled Documents
Controlled Document Log
11. The Regional Accounting Unit did not prepare the Controlled Document Log
(DHS4070) for the Blank Voucher Checks or the Purchase Orders. Accounting
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Manual Item 403 states that local offices must maintain a DHS4070 for each
controlled document type.
WE RECOMMEND that Regional Accounting Unit maintain the DHS4070 for
the Checks and Purchase Orders.
Physical Inventory of Controlled Documents
12.
The Regional Accounting Unit had not prepared the Monthly Physical Inventory
and Reconciliation of Controlled Documents (FIA4351) since June 2005 for the
Checks, Cash Receipts, and Purchase Orders. Accounting Manual Item 403
requires that a Monthly Physical Inventory and Reconciliation of Controlled
Documents (FIA4351) be prepared each month. Inventory and reconciliation of
the controlled items reduces the risk of improper use.
WE RECOMMEND that the Regional Accounting Unit prepare the FIA4351 for
all controlled documents on a monthly basis.
Procurement Card
Reconciliation of the Transaction Detail Report
13. The Zone 1 Office Director approved the Transaction Detail Report before
reviewing the Procurement Card Log and invoices. Reconciling the purchases
listed on the Procurement Card Log to the Transaction Detail Report will ensure
that items purchased were authorized, recorded on the report, and appropriately
accounted for as required by to the Procurement Card policy and procedures.
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WE RECOMMEND that the Regional Accounting Unit review the procurement
card log and invoices before approving the Transaction Detail Report.
Payroll and Timekeeping
Independent File for the Certified HR332A Report
14.
The Zone 1 Office timekeeper maintained the timesheets and HR332A reports.
The Primary Internal Control Criteria for Local/District Office Operations
recommends that the district office retain the HR332A report in a file
independent of the timekeeper, until the turnaround reconciliation has been
completed. Maintaining the HR332A independent of the timekeeper helps to
ensure that any changes made after the certifier signs the HR332A report would
be detected.
WE RECOMMEND that the Zone 1 Office maintain the HR332A report in a file
independent of the timekeeper until the payroll is reconciled a week after the
payroll is prepared.
Time Released Prior to Certification
15.
The Zone 1 Office timekeeper released the time to DC/DS prior to the time being
reviewed and certified when the Director was not available. Primary Internal
Control Criteria for Local Offices indicates the time is to be reviewed and
certified before it is released to DC/DS. The Zone 1 Office did not have a back
up certifier to review the time sheets and certify the time in the Director’s
absence.
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